Court’s Decision
The Bombay High Court dismissed the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the arbitral award, upholding the Arbitrator’s jurisdiction and findings. The Court affirmed that once the parties had voluntarily submitted to arbitration, participated without protest, and the Arbitrator had rendered a reasoned award, there was no ground under Section 34 to interfere. The Court held:
“Once the Tribunal has considered the issue of jurisdiction and passed a reasoned order, the same cannot be reopened under the guise of challenge under Section 34.”
Facts
A landowner entered into a development agreement with a developer for redevelopment of certain properties. Disputes arose regarding delays and defaults in compliance with the contractual obligations. The matter was referred to arbitration in accordance with the arbitration clause in the agreement. The landowner participated in the arbitration proceedings without raising any objection to the jurisdiction of the Arbitrator and allowed the proceedings to be conducted fully.
The Arbitrator passed a reasoned award rejecting the landowner’s claim and partially allowing the claims of the developer. Aggrieved, the landowner filed a petition under Section 34 of the Act, challenging the jurisdiction of the Arbitrator and the validity of the award, alleging that the reference to arbitration was invalid and that the award was contrary to public policy.
Issues
- Whether the challenge to the Arbitrator’s jurisdiction under Section 34 was maintainable after full participation in the arbitration without protest.
- Whether the arbitral award suffered from perversity or violated public policy under Section 34 of the Act.
- Whether there was any illegality in the Arbitrator’s findings warranting interference by the Court.
Petitioner’s Arguments
The petitioner (landowner) argued that the reference to arbitration was not valid as there was no proper invocation of the arbitration clause. It was further contended that the arbitration clause was incapable of being enforced due to alleged novation or alteration of the contract. The petitioner also argued that the arbitral award was perverse and violated public policy as it ignored key evidence and failed to appreciate the implications of the alleged breaches by the respondent. The award, according to the petitioner, was passed without proper application of mind and should be set aside under Section 34(2)(b).
Respondent’s Arguments
The respondent (developer) contended that the petitioner had fully participated in the arbitration without raising any objection to jurisdiction or validity of reference and was now estopped from doing so. It was further submitted that the award was well-reasoned, passed after due consideration of pleadings, evidence, and submissions, and no ground under Section 34 was attracted. The challenge was an afterthought and merely an attempt to delay the enforcement of the award. The respondent argued that Section 34 did not permit a reappreciation of facts or interference with reasoned findings of the Arbitrator unless the award was patently illegal, which was not the case here.
Analysis of the Law
The Court observed that the grounds for interference under Section 34 of the Arbitration and Conciliation Act are narrow and limited. The scheme of the Act mandates that once the arbitral tribunal rules on its jurisdiction under Section 16 and the parties participate without objection, they are deemed to have waived their right to object later.
The Court referred to Section 4 of the Act, which lays down the principle of deemed waiver of objections where a party participates without protest. The Arbitrator’s jurisdiction had been considered and accepted, and the award was passed after appreciating all materials on record. The Court emphasized that allegations of perverse findings or violation of public policy must meet a high threshold and cannot be a substitute for a second appeal.
Precedent Analysis
- Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1: The Supreme Court held that a court under Section 34 does not act as an appellate forum and cannot reassess or reappreciate evidence.
- Associate Builders v. Delhi Development Authority (2015) 3 SCC 49: The judgment clarified that interference on public policy grounds must involve fundamental policy of Indian law, interest of India, or basic notions of justice and morality, not mere erroneous interpretation.
- BSNL v. Nortel Networks (2021) 5 SCC 738: Reaffirmed the limited jurisdiction under Section 34 and that objections to jurisdiction must be raised at the earliest stage.
The Court applied these precedents to hold that the petitioner’s challenge was unsustainable.
Court’s Reasoning
The Court reasoned that the petitioner had participated fully in the arbitration and never raised any objection to the Arbitrator’s jurisdiction. The tribunal had already ruled on its jurisdiction under Section 16, and no challenge had been mounted at that stage. Thus, raising the same issue under Section 34 was barred. On merits, the Court found the award to be detailed, based on evidence, and not in contravention of public policy or justice.
“The jurisdictional challenge cannot be entertained now, as the petitioner consciously waived that right during the arbitral process.”
Conclusion
The petition was dismissed with the Court holding that there was no patent illegality or ground to interfere under Section 34. The arbitral award stood confirmed. The Court reiterated that parties must raise jurisdictional objections at the proper stage, and participation without protest amounts to acquiescence. No costs were awarded.
Implications
This judgment reinforces the principle of finality in arbitral awards and discourages belated challenges under Section 34 based on grounds that were waived earlier. It underscores that jurisdictional objections must be timely, and parties cannot approbate and reprobate. The decision promotes judicial restraint and adherence to arbitration’s objective of minimal court intervention.
FAQs
Q1. Can a party challenge the jurisdiction of the Arbitrator after fully participating in the proceedings?
No. If a party participates without objection, it is deemed to have waived its right to challenge jurisdiction under Section 4 of the Act.
Q2. What are the valid grounds to challenge an arbitral award under Section 34?
Only limited grounds like patent illegality, violation of public policy, or fundamental procedural infirmity. Re-evaluation of evidence is not permitted.Q3. Is failure to raise jurisdictional objections during arbitration fatal to a later challenge?
Yes. If jurisdiction is not challenged during the arbitral process, a party is barred from raising it later under Section 34.
